WLUP and WKQX to rock on under Randy Michaels if Cumulus backs out

Mark Boster / Los Angeles Times

Randy Michaels, former Tribune Co. CEO, addresses the employees of the Los Angeles Times during a town hall meeting in 2008. Cumulus Media is looking to pull out of a $50 million deal to buy two Chicago radio stations owned by Michaels' Merlin Media.

Randy Michaels, former Tribune Co. CEO, addresses the employees of the Los Angeles Times during a town hall meeting in 2008. Cumulus Media is looking to pull out of a $50 million deal to buy two Chicago radio stations owned by Michaels' Merlin Media. (Mark Boster / Los Angeles Times)

With bankrupt Cumulus Media looking to pull out of a $50 million deal to buy WLUP-FM 97.9 and WKQX-FM 101.1 after four years at the helm, the Chicago rock stations could soon revert to their owner: Randy Michaels’ Merlin Media.

Michaels, a longtime radio executive and former Tribune Co. CEO, said Friday he is ready to take over the stations, if necessary, and promised listeners they would continue with their current rock formats, at least in the near term.

“We are fully prepared to step in and operate the stations essentially as is,” Michaels said. “There are no changes being planned right now, other than behind the scenes.”

A bankruptcy judge is scheduled to rule Feb. 1 on motions filed Thursday by Atlanta-based Cumulus to reject a handful of “extremely unprofitable” contracts, including agreements to air Chicago Bulls and White Sox broadcasts on WLS-AM 890 and the deal to buy WLUP and WKQX from Merlin.

Cumulus has been operating WLUP and WKQX since January 2014 under a local marketing agreement with Merlin that included an option to transfer ownership of the stations. Cumulus paid Merlin a fee that escalated from $300,000 to $600,000 a month over four years, totaling more than $20 million since its inception.

In its filing Thursday, Cumulus said the stations have lost more than $8.4 million to date because expenses — including the monthly fees — exceeded revenues.

Merlin executed the option to sell the stations for about $50 million, based on a formula agreed upon in the 2014 contract, and filed a transfer application with the Federal Communications Commission on Oct. 24. Cumulus filed for Chapter 11 bankruptcy protection Nov. 29.

Michaels said he has no intention of withdrawing the FCC transfer application, which would require Cumulus to pay Merlin within five days of approval.

“That thing could pop any day,” Michaels said. “No one has opposed the application.”

Cumulus and Merlin have been engaged in discussions, but they have “not been able to arrive at revised terms,” Mary Berner, Cumulus’ CEO, said Thursday in a news release. Cumulus executives declined further comment.

On Friday, a source familiar with the situation said Cumulus would have to pay the $50 million to take ownership of the stations and has no intention of doing so.

Michaels said Cumulus has “not made a reasonable counterproposal,” but he did not rule out the possibility that the two sides could strike a revised deal before Feb. 1.

A former disc jockey, Michaels built his early reputation as architect of a raunchy radio format in Tampa, Fla., called the "Power Pig," and rose to CEO of radio station company Jacor after it was purchased by Chicago billionaire Sam Zell.

Michaels joined Chicago-based Tribune Co., then parent of the Chicago Tribune, after it went private at the end of 2007 in a transaction led by Zell. Michaels later became CEO but was forced out of Tribune Co. in 2010.

Partnering with Chicago-based private equity firm GTCR, Michaels formed Merlin Media in 2011, buying WKQX and WLUP in Chicago and WRXP-FM in New York, from Emmis Communications Corp. for about $198 million in cash and equity.

Cumulus brought alternative rock back to WKQX within days of taking over the station in 2014.

WLUP, better known as The Loop, is tied for 14th and WKQX is ranked 20th among Chicago stations in the latest Nielsen listener survey.

About two dozen staffers, including air personalities, are employed by Cumulus at WLUP and WKQX. Cumulus also operates the studios where all four of its stations, including WLS-FM 94.7, are housed.

Michaels said the agreement allows Merlin to operate the stations from Cumulus’ studios for an initial period. He also plans to hire the current air staff to keep the formats going, at least for now, if the deal falls through.

Longer term, if no agreement with Cumulus is reached, Michaels said “all logical options are on the table,” including selling the stations to another buyer.

Despite the ownership questions, Michaels said listeners should be able to tune out the background noise, even after the Feb. 1 hearing.

“You’re going to turn on 97.9 and hear The Loop and 101.1 and hear WKQX,” Michaels said.